PRA calls for OFT fuel investigation to re-open

“As Australia’s largest supermarkets cease making fuel offers after a watchdog deems that offering customers discounted petrol is a threat to competition, it is imperative that the Office of Fair Trading (OFT) re-open their investigation into the UK fuel market” said Brian Madderson, Petrol Retailers’ Association Chairman.

In the landmark move, the Australian Competition and Consumer Commission (ACCC) has  announced that they had successfully brokered a voluntary agreement with their ‘Big 2’ supermarkets, Coles and Woolworths, to cease making fuel offers that were judged to be causing a substantial weakening of competition in the medium to long term.

Madderson continued “This is a development that the PRA been monitoring closely through our contacts at the Australian Service Station and Convenience Store Association (ASSCSA).

“The move further discredits the OFT response to our substantive complaints about unfair competition in the UK fuel market. It also demonstrates that Australian supermarkets fully understand their retailing responsibilities.”

The ACCC were concerned about the longer-term effects on the structure of the retail fuel markets from cross-subsidisation by the grocery chains that enabled them to undertake deep discounting with fuel offers. By this action, the ACCC has sought to protect the consumer from fast approaching lack of choice and higher pricing as viable competition is removed from the market.

Likewise in the UK, the number of forecourts has dramatically reduced as the ‘Big 4’ supermarkets, Tesco, Asda, Sainsbury’s and Morrisons, have doubled their share of the retail fuel market to nearing 50 per cent in just over 10 years.

Madderson confirmed “Last year another 175 independent forecourts closed for business. This follows the admission by Justin King, CEO of Sainsbury, in a BBC Radio 5 Live interview that the only product sold below cost had been fuel.

“This was said to have occurred over a 6 month period and increased Sainsbury’s national fuel sales by 6 per cent. This is the equivalent to the entire annual volume of 40 independent retailers. Such practices are causing the continuing trend of independent forecourt closures.”

The Australian view is that the supermarkets should focus their price fight with each other in the specialist arena of grocery essentials so that all shoppers benefit, not just those with cars. This seems to be at the core of the present stand-off between Sainsbury and Tesco over brand match comparisons.

The PRA now intends to seek support from politicians, Government officials, other trade associations and motoring organisations in robustly lobbying the OFT to re-open their investigation into the UK market. One of its objectives would be to broker a similar voluntary agreement to the one now in place in Australia with the UK’s ‘Big 4’ supermarkets as quickly as possible. This would lessen consumer detriment arising from lack of future competition and ensure that independent retailers had a more level playing field in the fuels market.